Oil prices continue to plummet despite a deal by major producers to cut crude production by 9.7 million barrels per day. Further reductions may be necessary to meet falling demand amid global Covid-19 shutdowns.
Russian Energy Minister Alexander Novak and his Saudi counterpart Prince Abdulaziz bin Salman said in a joint statement on Friday they will “continue to closely monitor the oil market and are prepared to take further measures jointly with OPEC+ and other producers if these are deemed necessary.”
According to the Russian Energy Ministry, both countries are firmly committed to fulfilling the OPEC+ deal on cutting oil output.
“Russia and Saudi Arabia are also confident that their partners in OPEC+ and other producers will fulfill the undertaken commitments,” the ministry said after a phone call between the two officials.
Bin Salman said earlier that the kingdom is ready to cut oil production further if needed when the OPEC+ alliance meets again in June. “Flexibility and pragmatism will enable us to continue to do more if we have to,” he said. State-run oil major Saudi Aramco announced that it would supply customers with 8.5 million barrels a day as of May 1. That is almost four million a day below planned sales in April.
OPEC warned on Thursday that even full implementation of the cuts won’t prevent a surplus in the second quarter, when demand for its crude will fall to the lowest in three decades.
“The Saudis and Russians are being proactive in providing forward policy guidance in an effort to reassure markets that they mean business when it comes to reducing their output,” head of commodity markets strategy at BNP Paribas SA, Harry Tchilinguirian told Bloomberg.
OPEC and its allies have been trying to hammer out an accord since their March failure to introduce new output cuts. The OPEC+ agreement that has been in place for around three years expired at the end of March and Saudi Arabia ramped up its production to a record high of more than 12 million barrels per day.
Crude prices have been affected by the coronavirus pandemic which has greatly reduced the demand for oil, creating a global oversupply. Despite the finalized accord, oil prices hit a fresh 18-year low on Friday, with US benchmark WTI down almost 10 percent below $18 a barrel. Brent gained slightly to $28 per barrel.
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